Why Do Foreign Firms Have Less Idiosyncratic Risk Than U.S. Firms?

Söhnke Bartram, Gregory Brown and René Stulz
Additional contact information
Gregory Brown: Unviersity of North Carolina at Chapel Hill

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Using a large panel of firms across the world from 1991-2006, we show that the median foreign firm has lower idiosyncratic risk than a comparable U.S. firm. Country characteristics help explain variation in the level of idiosyncratic risk, but less so than firm characteristics. Idiosyncratic risk falls as government stability and respect for the rule of law improve. Idiosyncratic risk is positively related to stock market development but negatively related to bond market development. Surprisingly, we find that idiosyncratic risk is generally negatively related to corporate disclosure quality. Finally, idiosyncratic risk generally increases with shareholder protection. Though there is evidence that R[superscript 2] increases with creditor rights and falls with the quality of disclosure, these results are driven by the relations between these variables and systematic risk rather than by the impact of these variables on idiosyncratic risk.

Date: 2009-04
New Economics Papers: this item is included in nep-bec and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://www.cob.ohio-state.edu/fin/dice/papers/2009/2009-5.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.cob.ohio-state.edu/fin/dice/papers/2009/2009-5.pdf [301 Moved Permanently]--> https://www.cob.ohio-state.edu/fin/dice/papers/2009/2009-5.pdf [301 Moved Permanently]--> https://fisher.osu.edu/fin/dice/papers/2009/2009-5.pdf)

Related works:
Working Paper: Why Do Foreign Firms Have Less Idiosyncratic Risk than U.S. Firms? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2009-5

Access Statistics for this paper

More papers in Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().